Company accused of misappropriating millions in health-care funding meant for impoverished First Nation

The lawsuit reveals Health Canada repeatedly renewed Crupi Consulting’s contract while it was the subject of an investigation by the government and RCMP

Kashechewan, located in Ontario’s far north, is one of Canada’s most isolated and troubled reserves, dealing with annual flooding, a chronic suicide crisis and other severe health and infrastructure issues

The federal government is suing an Ontario company over allegations it diverted and misappropriated millions in health-care funding intended for one of Canada’s most impoverished First Nations.

The lawsuit also reveals that Health Canada repeatedly renewed its contract with the company even while it was the subject of an investigation by both the government and RCMP over concerns it was fraudulently managing funds intended for the Kashechewan First Nation.

In September 2016 the RCMP charged one of two brothers named in the suit, Giuseppe Crupi (who goes by Joe), for fraudulently obtaining and misappropriating $1.2 million meant to feed 400 elementary school children in Kashechewan. He faces eight counts related to fraud and laundering the proceeds of crime.

But a lawsuit filed Oct. 2 by Health Canada against Crupi and his brother Franco contains a new allegation involving a further $1.4 million in Health Canada funds, including undocumented payments to companies run by the brothers and “Christmas bonuses” paid out of money designated for Kashechewan health projects.

The allegations centre around a Thunder Bay, Ont. company called the Crupi Consulting Group. Franco Crupi is still the company’s president, while Joe Crupi was the treasurer until about 2014. The suit names both brothers plus four companies they’re alleged to have been directing.

In an interview, Franco Crupi — who has not been criminally charged — told the National Post he will be fully defending himself.

“It’s gone to my lawyers and they’ll be dealing with it,” he said. The fraud allegations concern his brother, Crupi said, with whom he is not on speaking terms.

“I had nothing to do with that file. I am the president of the company, but I had nothing to do with the file. What can I say right now? It’s going to be looked into, because many of those expenditures had been authorized by Health Canada.” (The National Post was unable to reach Joe Crupi for comment.)

Kashechewan, located on James Bay in Ontario’s far north, is one of Canada’s most isolated and troubled reserves, dealing with annual flooding, a chronic suicide crisis and other severe health and infrastructure issues.

“I don’t think anybody in Canada could believe the level of poverty and deprivation that exists in Kashechewan,” said NDP MP Charlie Angus, whose Timmins-James Bay riding includes the reserve. “This is an incredibly impoverished community that did not have the resources to protect their own interests. They had to trust the government, and they had to trust the people that the government said would look after their finances for them.”

Until this year, Crupi Consulting was on a list of companies approved by the federal government to bid on management contracts for First Nations that default on their finances. Since 2007 it has been involved in financial management for at least seven different First Nations. When Kashechewan defaulted on its finances more than a decade ago, the band government brought Crupi Consulting on as co-manager, with Joe Crupi taking the lead.

Then in 2010, Health Canada appointed the firm as the third-party manager of the Kashechewan Health Services Board, meaning the government provided the money allocated for Kashechewan’s health-care directly to Crupi Consulting, which was entrusted to deliver the services.

In 2011, the auditor general’s office informed the government of concerns over possible fraud in Joe Crupi’s Kashechewan work, and Indigenous and Northern Affairs Canada opened an internal investigation. That investigation was turned over to the RCMP in December 2012, which eventually led to the criminal charges against Joe Crupi in 2016.

Yet Health Canada’s own lawsuit claims the ministry renewed its health-funding agreement with Crupi Consulting for Kashechewan three times while the investigation was underway, in 2012, 2013 and 2014. The company remained as third-party manager of the health board until March 2015, according to the lawsuit, and co-manager of Kashechewan First Nation until 2014.

Asked why it renewed the contract, Health Canada only responded that “once the Department was informed of the RCMP investigation into the Crupi Consulting Group, Health Canada audited its agreements with the company and the Kashechewan Health Services Board.”

In an interview with the Post, Angus said he’d been personally bringing concerns about Crupi Consulting to the government since 2009. “There were all manner of alarm bells being rung about this company and their practices, and Health Canada just gave them, basically, a blank cheque to do what they wanted,” he said.

I’ll tell you one thing, I feel betrayed by everybody

The lawsuit relies on a special audit completed by Health Canada in November 2016 that concluded Crupi Consulting “misappropriated and/or mismanaged” a total of $1,395,133 between 2008 and 2015.

The government has recovered $232,056 by withholding payments to the company, but is seeking to recover the balance plus interest, punitive damages and court fees. It accuses the brothers and their companies of breach of contract, unjust enrichment, deceit and negligent misrepresentation.

In one example, the audit showed $259,892 in expenses paid to 6721672 Canada Ltd., a company that listed Franco Crupi as a director and was dissolved in 2009. The payments came with scant descriptions, such as “Nutrition Program (Freight included)” and “ADI Supplies.”

“During the audit, Giuseppe (Joe) Crupi informed Health Canada that Crupi Consulting had paid most of these expenses in cash and that receipts could not be located,” the lawsuit says. “The invoices to support these expenses included minimal details about the goods or services acquired and the Defendants provided no additional supporting documents.”

The lawsuit alleges another $129,100 was spent on computers and teleconferencing equipment from a company owned in part by a friend of Joe Crupi, and says the Crupis “were unable to explain who requested the equipment or which program it was intended for” and couldn’t provide shipping documentation to show it ever arrived in Kashechewan. (Franco Crupi insists it was delivered, saying it’s the airline that can’t keep their records straight.)

The audit also found claims for thousands of dollars in HST, though Kashechewan is exempt from paying that tax.

In a section outlining ineligible payments, the lawsuit shows $26,015 for “Christmas bonuses paid to KHSB Board members,” and $1,0171 for “a payment to ‘Happy Time Tours.’” It alleges $244,477 was spent on “purported administrative expenditures that were not actually incurred by Crupi Consulting,” and another $212,987 was paid for ineligible water and sewer fees.

Franco Crupi maintains that Health Canada had approved these expenses, and just doesn’t understand the informal nature of how transactions are conducted in the region.

MP Charlie Angus: “I don’t think anybody in Canada could believe the level of poverty and deprivation that exists in Kashechewan.”John Lappa/Postmedia/File

“I’ll tell you one thing, I feel betrayed by everybody,” he said. “By the government not living up to the decisions it’s made, by staff members who have done things to me and my company that I never expected would have been done, and even you as reporters.”

It is still unclear why the government renewed contracts with a company it was simultaneously investigating for fraud.

“What transpired in that situation was incredibly tragic,” said Paul Thoppil, chief financial officer with Indigenous and Northern Affairs Canada, in a Commons committee meeting on March 9, 2017.

“It just shows the fragility of our federal government procurement processes … we can have somebody who still gets selected who actually undertook something that terrible.”

At the time, Thoppil said Crupi Consulting was still on the list of companies pre-qualified to bid on First Nations management contracts, and that the government was working with Public Services and Procurement Canada to have them removed. The government says the company is now off the list.

Meanwhile, in February 2016, INAC started contacting other First Nations who had retained Crupi Consulting’s co-management services around the same time, including the Obashkaandagaang, Aroland, Cat Lake, Ojibway Nation of Saugeen, Gull Bay and Pic Mobert First Nations. The letter requested a joint review of their records.

Asked if Health Canada or INAC had determined whether Crupi Consulting had misappropriated the funds of any other First Nations, a government spokesperson responded: “That work is still currently underway.”